Pace of new hiring activity spells good business for alcohol and drug screening firm

KALAMAZOO — The level of hiring activity and the frequency of job changes for today’s workers has generated steady growth for companies performing alcohol and drug screening.

Just ask Rick Van Laan, the owner of the ARCpoint Labs franchise in Kalamazoo that’s experienced solid growth in recent years.

The business-to-business side of the company that conducts screenings for employers has posted sales growth averaging 10 percent annually in the last five years, Van Laan told MiBiz. A franchisee of the Greenville, S.C.-based ARCpoint Labs since 2010, Van Laan planned to move this week out of a 1,500-square-foot leased office on Portage Road to larger quarters on Lover’s Lane in Kalamazoo.

A former corporate HR professional at Borgess Health, Van Laan attributes the ongoing business growth to a combination of more companies doing drug screenings, increased hiring and a tight labor market.

Not only is there far more growth-related hiring than when he acquired the Kalamazoo franchise during the depths of the Great Recession, but people also have more opportunity to change jobs. In turn, that creates more need for pre-employment screenings when employers hire a replacement.

“Employees are leaving their company if their wage isn’t where they want it to be or they’re not being treated like they want to be. So there’s a lot more turnover too,” Van Laan said. “The employees have a lot of choice, where back in 2010 people were just glad to be employed. They would take what they could get. Now it’s kind of a buyer’s market for the employees, so they’ll leave with a lot of confidence and go to another place.”

The Kalamazoo operation is one of three ARCpoint Labs franchises in Michigan, along with Grand Rapids and Lansing. The company’s franchisees operate more than 100 locations in 21 states with plans to grow to 325 sites by 2020.

ARCpoint Labs works with clients to collect pre-employment and random samples, sends them to a lab for analysis, and then reports the results back to employers. The $50 screenings test for marijuana, cocaine, amphetamines, methamphetamines and opioids.

The Kalamazoo franchise has contracts with 130 local employers, many of them in the manufacturing or transportation sectors, and works with job-placement firms such as Manpower Inc. and Snelling. The franchise also performs biometric employee testing for workplace wellness programs.

On the consumer side of the business, ARCpoint Labs offers services such as DNA tests for paternity and child custody cases and has averaged 25 percent growth annually over five years, Van Laan said.

GROWING MARKET

Recent studies have shown growth in the use of pre-screening drug testing services like those offered by ARCpoint Labs.

In a survey last year from The Employers’ Association in Grand Rapids, 76 percent of the 135 responding employers said they use drug and alcohol tests as part of their pre-employment screening process. That’s up 11 percent compared to a similar study conducted in 2014. More than half of the companies who participated in the survey operated in the manufacturing industry.

An annual report issued last September by Quest Diagnostics Inc. indicated that the percentage of employees at U.S. employers who tested positive for drugs grew in 2015 for the third straight year to a decade high. Of the 9.5 million urine tests, 4 percent tested positive, compared to 3.9 percent in 2014 and a 10-year low of 3.5 percent in both 2011 and 2010, according to the Madison, N.J.-based Quest Diagnostics.

Positive tests using oral fluids increased to 9.1 percent in 2015 from 6.7 percent in 2013, largely due to a double-digit growth in positive tests for marijuana.

At ARCpoint labs, four out of 10 clients take a zero-tolerance approach to a positive test by a current employee or prospective employee. However, Van Laan has noticed a change in sentiment among some companies as the labor market tightened the last few years. Some employers, particularly small companies and those in non-regulated industries, have become a little more forgiving as they’ve had difficulty finding qualified workers. They “want to do the right thing” and work with people, especially those who may have a substance abuse problem, Van Laan said.

“A lot of folks say, ‘I believe in giving people a second chance,’” Van Laan said. “It puts the onus on the employee. ‘Hey, look, you can’t keep going down that road. We’re going to give you another chance and shake you up a little bit, but it’s up to you to be a success and we’re going to help you.’”

Van Laan cites the example of a small local manufacturer that was having quality problems. The owner decided to do random testing on employees. The results found that about 75 percent of the company’s workers tested positive for marijuana or another substance, putting the company’s management in a difficult position of balancing the risk to the business against having enough people to get the work done.

As unemployment dropped in recent years, and now sits at 5.3 percent in Michigan as of January, the resulting labor market has left some employers reluctant to do pre-employment screenings, said Ryan Bekins, who owns the ARCpoint Labs franchise in Grand Rapids.

Some employers worry that doing screening limits their pool of applicants for open jobs, Bekins said.

“I really think the tight labor market has an impact,” he said. “They know they’re in a bind. What do they do?”